Sally Beauty Falters, Hits 52-Week Low - Analyst Blog

Investors seem to be losing confidence in Sally Beauty Holdings Inc. SBH as its shares have been losing momentum since reporting second-quarter fiscal 2014 results on May 1, 2014. Since the earnings release, Sally Beauty's shares have dropped 3.2% and hit a 52-week low of $24.15 yesterday, with shares tumbling nearly 17.5% year-over-year.

This specialty retailer and distributor of professional beauty supplies recorded second-quarter adjusted earnings of 36 cents a share, missing the Zacks Consensus Estimate of 39 cents and remaining flat year over year. Adjusted net income for the quarter also slumped 8.8% to $59.2 million.

Its top line of $919.5 million also came below the Zacks Consensus Estimate of $932.0 million. Management blamed the sluggishness in sales on harsh weather conditions in the U.S., leading to more store closures than last year, reducing footfall. However, regions that remained unaffected by store closures witnessed improved customer traffic, facilitating sales to display a year-over-year improvement of 2.4%.

Also, estimates for the company have been portraying a downtrend since the company delivered second-quarter results. It seems that analysts have become less constructive on the stock's future performance. This is evident from the downward movement in the Zacks Consensus Estimate that slipped 5.5% to $1.55 for fiscal 2014 and 5.9% to $1.77 for fiscal 2015 in the past 60 days.

This Zacks Rank #4 (Sell) stock has long-term earnings growth expectation of 10.4%, which is relatively lower than the peer group average of 16.3%, depicting inherent weakness.

However, the expectation of improvement in retail traffic has made the company optimistic about its future prospects.

Some better-ranked stocks in the same industry include Build-A-Bear Workshop Inc. BBW, with a Zacks Rank #1 (Strong Buy), and Five Below, Inc. FIVE and Office Depot, Inc. ODP, both holding a Zacks Rank #2 (Buy).